Originally written by Anna Jordan on Small Business
New research shows that the UK’s SMEs could be racking up an unsustainable debt bill of up to £105bn during the coronavirus lockdown.
TheCityUK’s Recapitalisation Group suggest that by March 2021, the debt of UK financial non-profit corporations (PNFCs) could be between £90bn and £105bn, of which CBILS could contribute between £10bn and £20bn. They say that this level of unsustainable debt could stifle future employment, research and development, investment and general economic recovery.
To address the debt, firms may have to raise equity and/or restructure their debt. Historical data shows that the total amount of private equity investment in 2018 was £20.6bn, total private equity into SMEs in 2018 was £6.7bn and bank lending to SMEs in 2019 was £57bn. ‘Significant volumes’ of structured capital from existing and other sources is vital to the long-term competitiveness of the economy.
In a letter to the Bank of England governor, TheCityUK’s leadership council chairman, Adrian Montague, wrote: “Small unlisted businesses (including micro firms, family-owned businesses and sole traders) have different requirements. Many are financed by closely-held equity and branch bank lending; they have little or no contact with professional investors; and yet their resilience and prosperity is

Read more...